The recent modest air of confidence in most sections of the Far East timber trade has been followed by some success in raising prices for sawn lumber and plywood. Although Japan has forecast almost the same consumption figures for 2013 as were reported for 2012, the economy has performed better than forecast and news on the ground seems to indicate more activity in house construction and in the rebuilding of the tsunami-affected areas. Plywood prices in particular have risen by 5-10% and some manufacturers exporting to Malaysia and Indonesia believe there is room for another 5% in the next few months.
There was a slower rate of business with China from March to May, but now there is a steady increase towards more normal levels. Even so, China imported more than 4.5 million m³ of sawn lumber in the first quarter of 2013, some 3% more than the same period last year.
China’s timber import figures are already quite staggering and analysts are predicting that, long term, growth and consumption will rise even further, fuelled to some extent by a predicted 10 million-plus housing starts this year. New Zealand’s log and sawn lumber exports to China have had a massive boost in recent years, and more recently have filled the gap created by British Columbia’s new restrictions on log exports.
These days markets are so interactive that when evaluating prices and prospects for European destinations it is easy to forget the massive volumes inter-traded in the ‘local’ markets in the Asia Pacific region. Thailand, South Korea, Taiwan, China, Japan, Vietnam, and India all import timber, and export timber and products, with 50% of their total products traded between themselves.
Furniture exporters in China report that the expense of compliance with the EU Timber Regulation (EUTR) is adding 5% to their costs, making their products uncompetitive in some markets. In addition, there’s a steady drift of new manufacturing investments away from China to Cambodia and Vietnam as increasing urbanisation pushes up Chinese wage rates.
Although there is sometimes a feeling that control by central governments can be unwieldy, there is no doubt that China is prepared to act swiftly and decisively to support industry. A recent example is in panel products where a 2012 downturn in trade caused problems for manufacturers. Now the government has taken steps to provide subsidised loans for updated technology and improvements in products.
Meanwhile, housing and property is booming, with very significant new investments. The tug of war between those less optimistic about timber business prospects in China and others with the more positive view ended up as forecast in our May report (TTJ May 18/25), with current trade and prices rising in anticipation of continuing strong infrastructure spending this year. Importers who held off early-year purchases finally had to pay higher prices as export countries in Asia and Africa reported the current low levels of log supply and extended delivery dates for sawn lumber.
Price movements Log and lumber prices are rising, Malaysian and Indonesian plywood prices are firm and strong demand from Japan is expected to push prices up another 5%. Meranti sq and up export logs have put on US$20-25/m³ since April after an earlier rise, and small logs have also risen by US$20/m³. Kapur logs also increased by US$20/m³. Domestic logs in Malaysia and Indonesia also made further gains and are likely to remain firm. Sawn lumber prices are also making progress, with increases of US$10-15/m³ for DRM and US$10/m³ for MLH.
Perhaps a useful guide to sawn hardwood price trends is the top 10 American hardwoods, especially red and white oak. Demand is very strong in all major markets and for all these species in almost all grades prices had risen 5% by April and since then are still very firm and on a rising trend. US exporters report demand is good in all their Far East markets, with the exception of Vietnam.
European markets European buyers are still constrained by low consumption and some worries over the EUTR, in spite of some reassuring noises from the appointed authorities which appear to realise some clarification of the rules is still required. Construction activity in almost all European countries was down again by around 5% in the first quarter. Only Spain has shown a slight gain recently, but this is from a very low base.
At present it seems almost certain that the steady, long-term decline in volume tropical hardwood imports will continue through 2013. Prices for Far East species are struggling to make ground in Europe in these very dull trading conditions. There is also tough competition from West Africa, where sawn lumber prices are largely unchanged, although the advantage of faster delivery on the shorter sea route is no longer available as sawmills struggle to maintain full production. Sapele remains the firm favourite in Europe and China.
An interesting exercise in price comparison is to check on the 10-year price performance of the most traded hardwood timbers. This is carried out for American lumber and a recent survey showed that of a mix of 10 major species in several different grades almost half the prices were currently some 20% below the maximum achieved 10 years ago and the rest were up to 5% lower. Applying the principle to meranti logs gives a more positive result as prices are currently much higher then in the same month of 2003. However, that may be misleading as meranti log and lumber prices have been much higher at some periods in earlier years.
From a producer’s view it may be more interesting to calculate if today’s prices have even kept pace with inflation in the buying countries. Using a very modest compound inflation rate of 3% for the UK the answer is probably a qualified yes for most Far East timber but only for a very few West African species
